TATA MOTORS

Raja Rao, Vice President, Manufacturing, and BB Parekh, Chief, Strategic Sourcing of Tata Motors Ltd have been instrumental in leading the reorganisation of the Pune plant

Growing pains
Tata Motors Ltd has been steadily extending its global footprint since its first vehicle rolled off the production line in 1954. Five years ago, it reported massive losses, but thanks to astute management, a reorganisation of facilities and the supply chains that serve them, the company is on target to double its capacity, writes Maxine Elkin

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ata Motors Ltd, which is part of the Tata Group, is Indias largest commercial vehicle manufacturer and second largest car manufacturer. The company is busy rationalising its manufacturing operations to enable it to double production from 400,000 to 800,000 units in the next two to three years. In 2005-6 Tata reported revenues of US$5.5 billion. All this

from an organisation that was in crisis five years ago, reporting a nett loss of five billion rupees, its worst ever. Most analysts credit Managing Director Ravi Kant with the turnaround. And on the ground, his manufacturing and logistics chiefs are reorganising the production facilities and the supply chains that serve them. His genius has been to accelerate the development of bright, forward-thinking managers, and the

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segments, says Rao. From medium and heavy commercial vehicles to light commercials and the smaller pick-up models, as well as passenger cars. This has led to us rationalising the product portfolio in geography and location. As a result, we have plans in the coming years to migrate medium and heavy commercial production to Jamshedpur and Lucknow and will concentrate on multi-utility, the pick-ups and light commercial vehicles here [at Pune]. The passenger plant is also gearing up for volume increase, and we are trying to find an alternate location in and around Pune for another site. The small vehicles what we call the last-mile vehicles will be shifted to a location close to Delhi, Uttaranchal. Maybe by May 2007 we will start production in that location. Through these measures, the inbound and outbound logistics will be taken care of and the quality issues you get with multiple location production that also can be improved, says Rao. At the same time, BB Parekh, in his role as head of strategic sourcing, is using the companys buying power to get better prices. There is huge opportunity to do this between the passenger cars and trucks. Take for example steel, where we have combined contracts across our range and been able to leverage the total buying power. Indirectly, we also drive the

Tata Motorss Pune facility produces 900 commercial vehicles and about 800 passenger cars a day including the multi utility Safari

team in place at Pune is a good example of this policy. I spoke to MV Raja Rao, Vice President: Manufacturing, Auto, Tata Motors Ltd, and BB Parekh, Chief: Strategic Sourcing, Strategic Sourcing Group, Tata Motors Ltd in Pune, the vehicle makers stronghold of CV and car manufacturing, about the changes at the plant and how the supply chain function was central to the decision to reorganise manufacturing. Rao says We have three manufacturing locations Pune, Jamshedpur and Lucknow. We have another facility planned in West Bengal [for passenger car production]. Here in Pune, we produce heavy trucks and passenger cars. From producing about 300 vehicles a day five years ago, we are now producing 900 commercial vehicles and about 800 passenger cars a day. This has created a problem for inbound and outbound logistics. The plant area is getting very congested.

Rationalising the product portfolio The Indian economy is doing well and the forecasts are good. Consequently, we are ramping up volumes in almost all

purchasing of logistics services; the policy that governs the decision is set by us, he says. The complexity of manufacturing at the Pune plant places huge demands on the supply chain. All the lines run in mixed mode production, and there are 220 varieties of vehicles [what Tata refers to as vehicle combination numbers]. Rao admits that running a mixed mode operation is a huge challenge for the supply chain, and Tata Motors Ltd is tackling this issue with two systems of supply. For bulky items and modules, the vehicle maker operates a type of electronic Kanban system in which the suppliers take responsibility for feeding that particular line. It is their responsibility to make sure the line is continuously fed. Most of them are feeding directly on to the line, and they maintain the minimum inventory levels required, depending on transit time and takt time. Essentially the biggest items, the most critical from a volume point of view, are organised that way. This includes fuel tank systems and very large pressings, Rao tells AL. 4
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Tata in Pune
Size 910 acres Established 1966 Production lines: * The Tata high-end MUV, the Safari * The 750 kg ACE, the last-mile vehicle, is being built on a new line, but this will move to Uttaranchal around May 2007 * Medium and heavy commercial vehicles * Light commercial vehicles * Pick ups and multi-utility vehicles. The passenger car line: There are three models, with several variants. Vehicles meet  different classes of emissions regulations: for India BS3 is the requirement. Tata exports Euro 3 vehicles and has started exporting Euro 4 as well.  he car plant set a world record from concept to roll out took T 31 months; from ground-breaking ceremony to rollout took 27 months. The lines are currently being extended to allow for capacity increases. * The Indica and Indigo are built at Pune, but there is no fixed sequence. Line loading is as per the requirements of the market * The line is just over 1km in length * Time taken to assemble: five hours, takt time 70 seconds. Wiring harnesses: Motherson Sumi provides some, but there is a cooperative  society run by female dependants of employees. Its electronics division manages the harnesses.

deliver it in the plant. On-the-line sequencing is done by Tata Motors staff. This pilot project has been successful and Rao reveals that this system might be rolled out to the commercial vehicle lines in the future. But Parekh believes that they have yet to realise the full potential benefits of using a 3PL, partly because we have been limited in our approach, he says. There are certain regulations in India that prevent a LSP from working on your line, so we have some limitations which mean we are not able to exploit it fully, to the extent that we think we could. Hopefully it will move forward in that direction. There are various forms of delivery into Pune. The out station vendors suppliers who have a warehouse close to the premises deliver directly to the line in dedicated logistics trolleys, on a shift basis. The suppliers do the same, depending on manufacturing requirements. But certain vendors who are located far from the Pune site sometimes cannot deliver directly to the line, so these supplies go to central stores. There they are unpackaged and put on the logistics trolley and then delivered to the line, either by the contractor or by company employees. Our aim is to get everything brought to

The 3PL experiment The second system that Tata is deploying is the 3PL route. For the past year, the vehicle maker has used Indian logistics service provider TVS to organise the supply for the passenger car line (Indigo and Indica). Rao says: They pick up from the supplier and do some sequencing at a warehouse in the region and then deliver on line as per the requirements. TVS has a warehouse in Pune. It provides material in the sequence that we provide, so it they organise the logistics up to the manufacturing block. From there the logistics is managed independently by us. They dont deliver it online, but they

Tata Motors is outsourcing the assembly of modules and units, retaining only high-end activities inhouse

the line, says Rao. The time and cost involved in unpacking and repacking material is not in line with Tatas strategy. We have got 70 per cent of the way there, but we still need to do the rest of the job, he admits.

A major problem for Tata Motors is the transporting of finished vehicles. The biggest headache is getting vehicles to the dealers in the same pristine condition in which they left the plant

Radical outsourcing strategy adopted At the same time, this pattern of supply will change as the effects of the rationalisation of production lines start to bite. The complexity of the multiple product handling will come down drastically and the volumes of the regular items will increase with production. The company is also adopting a radical outsourcing strategy. To meet the needs of the increase in capacity, Tata is increasingly outsourcing. In addition to logistics outsourcing initiatives, the vehicle manufacturer is looking for more aggregate systems and modular assemblies, which will combine many different parts. Parekh notes: This kind of buying/assembly will mean that the supplier has to be somewhere within 10 to 20km of the plant, so they will become local suppliers. We are trying to retain only core operations in house, and all other operations that are less value-added, will be passed on to suppliers. 4

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Suppliers and supply

*F  ifty five per cent of all suppliers by number are located in Maharashtra for this plant. There are other operators that are in Jamshedpur, meeting the requirements for the Jamshedpur site. Apart from that, there are two major auto clusters with suppliers in Delhi in Chennai. This constitutes 99 per cent of Tatas supplier base. * Supplier parks are being established at the passenger car plant in West Bengal and Utteranchal (Delhi).  ata is doing milk runs but more with a view to trying to T consolidate the number of vehicles that visit the plant every day. There are about 30 milk runs operating now, just covering the state of Maharashtra. The company was considering running milk runs outside the  state of Maharashtra, but the 3PL model has superceded these plans. In future the entire responsibility will be handed to a 3PL provider.

Production of Tatas last-mile vehicle, the Ace, is being moved to a plant in Uttaranchal, near Delhi

assembly of the engines. We employ around 12,000 people. Over the next few years we will be keeping to a target of shedding around 4,000 people, says Rao.

The second initiative is complementary we are reducing the number of suppliers that we have to deal with. This again consolidates volumes and makes it possible for suppliers to come nearer to us and put up dedicated plants to meet our requirements. Parekh maintains that, This will reduce the number of people that will have to be contacted for material on a daily basis. The type of suppliers who currently send material to Tatas central store to be unpacked and repacked will decrease, the number of direct deliveries will increase and so will the use of modular assemblies. We are trying to depart from past practises and move to the kanban system and direct delivery, Rao tells AL. With outsourcing and trying to get the higher end, value-added sub assemblies into the plant, we intend to shed at least 30 to 40 per cent of our personnel and have fewer stations, and do the higher end activities inhouse. Traditionally Tata has produced everything, from wheel nuts to the finished vehicles. The company is moving away from this outdated mode of production and is aiming to do only the end-of-line line activities and get everything else from the outside, barring

Order from chaos So why is the supply chain is such a key part of development at Tata Motors? Rao explains: It is very important. Just to give you an example on average, 2,500 trucks enter the Pune site every day, so its chaos at the delivery gate. We have to move to a new way of working, the logistics have to improve. We want to do things differently in terms of getting increased sub assemblies and less parts and we want to encourage vendors to locate around us. We think this will have a positive impact on the logistics problems that we are experiencing. Developing supplier parks is key to the development of the new strategy at Tata Motors. There is no dedicated supplier park for the Pune plant, but there are two or three special development zones around Pune, established by the state government of Maharashtra. However, these are multiuse facilities. What we are trying to do at the new plant in Uttaranchal [Delhi] is to create a supplier park that will meet the needs of that plant. About 60 suppliers will be located there. A similar project is being developed for the small car plant we are setting up in West Bengal and again, about 60 or 70 suppliers will be located there, Parekh reveals. Encouraging supplier parks The benefits of the supplier park concept are clear: Number one from a logistics point of view is that you reduce the distance to travel, and you can make use of the plants position to reduce the need for packaging material, says Parekh. Also, material can arrive just-in-time. Communication improves because the suppliers are located next door and in future, we anticipate that those operations will be so integrated that whatever happens on our production line, the information will be available to the supplier on a real time basis and vice versa. In addition, the floor space required around the production line can be reorganised because the frequency of delivery can increase, reducing the need for material at the lineside. Parekh is investigating the possibility of integrating 4

Tata Motors commercial vehicle output has grown from 300 a day to 900 a day in just five years

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TATA MOTORS Carmaker

suppliers and Tatas lines seamlessly through the use of conveyors. There are certain rules and regulations concerning the payment of excise tax on the finished product which we are trying to examine and to see how we can honour that and still have this kind of flow. When the manufacturing process is completed, companies have to pay a tax and seamless flow like this how it will fit within the legal framework is something that we are examining, he says.

The legacy of cardboard The drive to increase the quantity of direct delivery to the line is intimately bound up with packaging. And a sentiment not exclusive to Tata was expressed by Raja Rao: Packaging has been a major problem. The legacy of cardboard is an expensive one. For the last two to three decades, all the packaging material used by Tata has been non-recyclable. It was almost taken for granted that the material has to come, be unloaded in the store unpackaged and put on to the delivery trolleys and sent to the line, Rao says. In the last couple of years, the company has been trying to

Running a mixed-mode operation is a huge challenge for the supply chain Raja Rao, Tata Motors

address this by introducing recyclable containers. Wherever possible, we are trying to have a dedicated container or the trolleys, where the material can be stored without any damage and delivered to the line. The moment the material is consumed, the trolley or container is replaced with a fresh load. The use of wood and cardboard has been so extensive at Tata Motors there used to be a large workforce to clear that. I think we have gone some 30 to 40 per cent of the way in that direction, but we need to do much more, Rao admits.

some progress to solve this problem but have a long way to go. Another problem, one that is outside the control of carmakers, is the road infrastructure in India. Parekh says, We have no guarantee of time period in which the vehicle will be delivered, particularly in the monsoon season. We have to face floods, broken bridges and these can result in severe delays in delivery to the customer. The road infrastructure is being addressed by the government, to connect all four corners of the country [see Indian regional report page 24]. That will go a long way to easing this problem but it will be an issue for some time, until the infrastructure is developed to its full extent, Parekh tells AL. The use of rail in India is minimal, even for outbound movements. Tata Motors is trying to develop its use, particularly between Delhi and Mumbai, but the availability of service is a stumbling block. We are now talking to the railways and there are independent service agencies that are coming forward who will possibly design trailers specifically for carrying vehicles. As of today, it is not really happening, Parekh adds. The Tata Motors facility in Pune is vast. And the legacy of building everything from the wheel nuts to complete vehicles has created an environment in which outsourcing is a radical and sometimes painful strategy. However, in addition to procuring outsourced material and services, Tata Motors is selling its expertise. The production engineering block at the Pune site manufactures design tooling jigs and fixtures, dies fixtures and patterns. It has recently been granted a license to seek outside customers and has already done work for GM, Ford, Continental, PAG and Peugeot. The day I visited there were tryout panels for a new Toyota project being pressed. The paint shop is also doing some body shell painting for the DaimlerChrysler facility next door, and there are plans to develop other outside contracts for the plant.

Finished vehicle flows In India, the predominant form of transport is the truck, and this is the mode used for outbound movements. Trucks pick up from the plant daily and deliver to the main export port, Mumbai. Echoing sentiments I heard elsewhere in the region, Parekh accepts there may be a need for a dedicated ro-ro port to cope with the anticipated increases in vehicle exports from India in the coming years. There is one which may possibly be developed on the western coast of India but that is still under consultation. We are thinking of hiring a dedicated auto handling port, but at the moment we dont have that kind of facility, he adds. A major problem is getting vehicles to the dealers in the same condition that they left the plant. Rao complains: There is a lack of respect for the product by the people transporting it. By the time the vehicles [commercial and passenger] reach the dealers, quite a lot of abuse has taken place. This creates a lot of bitterness with our first customer, the dealer. We have made

Outsourcing modules and addressing packaging concerns have created more space lineside for the assembly of passenger vehicles

We have a very clear cut plan for each segment, where we want to be. So the clarity is there, the plan is there and the money is getting spent, and almost all the products will be upgraded within two years, Rao concludes. The reorganisation of supply and production at Tata, and the doubling of volume, will ensure the company is a force to be reckoned with in India, and in its export markets, for many years to come.

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